Question 1

The Bank of Canada will engage in a repurchase agreement when it wants to ________ reserves ________ in the banking system.

Accepted Answer

A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently 
A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently

Question 2

The Bank of Canada will engage in a repurchase and resale agreement when it wants to ________ reserves ________ in the banking system.

Accepted Answer

A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently 
A)  increase; permanently 
B)  increase; temporarily 
C)  decrease; temporarily 
D)  decrease; permanently

Question 3

In the market for settlement balances,when the overnight interest rate is below the bank rate and above the bank rate less 50 basis points,the supply curve of reserves is ________.

Accepted Answer

A)  vertical 
B)  horizontal 
C)  positively sloped 
D)  negatively sloped 
A)  vertical 
B)  horizontal 
C)  positively sloped 
D)  negatively sloped

Question 4

The lower limit of the operating band for the overnight interest rate defines ________.

Accepted Answer

A)  the bank rate 
B)  the prime rate 
C)  the rate the Bank of Canada pays LVTS participants with positive settlement balances at the end of the banking day 
D)  the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day 
A)  the bank rate 
B)  the prime rate 
C)  the rate the Bank of Canada pays LVTS participants with positive settlement balances at the end of the banking day 
D)  the rate the Bank of Canada charges LVTS participants with negative settlement balances at the end of the banking day

Question 5

Explain why the bank rate is an upper limit for the overnight rate.

Accepted Answer

Anytime the overnight rate is below the

Question 6

To keep inflation from falling below the target range,the Bank of Canada ________.

Accepted Answer

A)  decreases the target for the overnight rate which causes the dollar to go down 
B)  decreases the target for the overnight rate which causes the dollar to go up 
C)  increases the target for the overnight rate which causes the dollar to go down 
D)  increases the target for the overnight rate which causes the dollar to go up 
A)  decreases the target for the overnight rate which causes the dollar to go down 
B)  decreases the target for the overnight rate which causes the dollar to go up 
C)  increases the target for the overnight rate which causes the dollar to go down 
D)  increases the target for the overnight rate which causes the dollar to go up

Question 7

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________.

Accepted Answer

A)  3.75 percent 
B)  4 percent 
C)  3.25 percent 
D)  3 percent 
A)  3.75 percent 
B)  4 percent 
C)  3.25 percent 
D)  3 percent

Question 8

The Bank of Canada neutralizes government receipts by ________.

Accepted Answer

A)  arranging an increase in government deposit auctions 
B)  leaving the system in a surplus position at the end of the day 
C)  reducing the banking system's settlement balances 
D)  leaving the system in a deficit position at the end of the day 
A)  arranging an increase in government deposit auctions 
B)  leaving the system in a surplus position at the end of the day 
C)  reducing the banking system's settlement balances 
D)  leaving the system in a deficit position at the end of the day

Question 9

The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as ________.

Accepted Answer

A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing 
A)  quantitative easing 
B)  conditional statements about the future path of the policy rate 
C)  interest rate expectations 
D)  credit easing

Question 10

It is the ________ assumption of ________ that allows for the transmission between nominal and real interest rates.

Accepted Answer

A)  new Keynesian; sticky prices 
B)  monetarist; sticky prices 
C)  new Keynesian; perfect markets 
D)  Bank of Canada; chartered banks allegiance to Canadian monetary policy 
A)  new Keynesian; sticky prices 
B)  monetarist; sticky prices 
C)  new Keynesian; perfect markets 
D)  Bank of Canada; chartered banks allegiance to Canadian monetary policy

Question 11

If the operating band for the overnight interest rate is from 3.5 to 4.0 percent,then ________.

Accepted Answer

A)  the rate on positive settlement balances at the Bank of Canada is 3.5 percent 
B)  the rate on positive settlement balances at the Bank of Canada is the lower limit of the operating band 
C)  the bank rate is the lower limit of the operating band. 
D)  Both A and B of the above. 
A)  the rate on positive settlement balances at the Bank of Canada is 3.5 percent 
B)  the rate on positive settlement balances at the Bank of Canada is the lower limit of the operating band 
C)  the bank rate is the lower limit of the operating band. 
D)  Both A and B of the above.

Question 12

Explain why the bank rate minus 50 basis points (ib-50)is the lower limit for the overnight rate.

Accepted Answer

When demand for reserves falls and the o

Question 13

What are the advantages of SPRAs and SRAs?

Accepted Answer

1.The Bank of Canada has complete contro

Question 14

If the Bank of Canada wants to relieve undesired upward pressure on the overnight interest rate it will enter into a ________.

Accepted Answer

A)  Special Purchase and Resale Agreement 
B)  Sale and Repurchase Agreement 
C)  Swap 
D)  Reverse Repo 
A)  Special Purchase and Resale Agreement 
B)  Sale and Repurchase Agreement 
C)  Swap 
D)  Reverse Repo

Question 15

The primary indicator of the Bank of Canada's stance on monetary policy is ________.

Accepted Answer

A)  the bank rate 
B)  the overnight rate 
C)  the growth rate of the monetary base 
D)  the growth rate of M2 
A)  the bank rate 
B)  the overnight rate 
C)  the growth rate of the monetary base 
D)  the growth rate of M2

Question 16

If the Bank of Canada expects the economy to to be exceeding its capacity,it ________ the operating band for the overnight interest rate.

Accepted Answer

A)  lowers 
B)  raises 
C)  leaves unchanged 
D)  stabilizes 
A)  lowers 
B)  raises 
C)  leaves unchanged 
D)  stabilizes

Question 17

The Bank of Canada ________ conducting open market operations in Government of Canada treasury bills and bonds in 1994.

Accepted Answer

A)  started 
B)  stopped 
C)  continued 
D)  implemented 
A)  started 
B)  stopped 
C)  continued 
D)  implemented

Question 18

The Large Value Transfer System (LVTS)________.

Accepted Answer

A)  was introduced on February 4, 1999 
B)  is the core of the Canadian payments system 
C)  is an electronic net settlement network designed to provide settlement to paper-based payments items 
D)  Only A and B of the above. 
A)  was introduced on February 4, 1999 
B)  is the core of the Canadian payments system 
C)  is an electronic net settlement network designed to provide settlement to paper-based payments items 
D)  Only A and B of the above.

Question 19

Describe some of the actions the Bank of Canada took to mitigate the effects of widening spreads and increased volatility in the term interbank market in the second half of 2008.

Accepted Answer

The Bank of Canada announced that it wou

Question 20

The Automated Clearing Settlement System (ACSS)________.

Accepted Answer

A)  was introduced on February 4, 1999 
B)  is an electronic net settlement network designed to provide settlement to wholesale transactions 
C)  aggregates interbank payments and informs the Bank of Canada of the net amounts to be transferred from and to each participant's settlement account with the Bank of Canada 
D)  Only A and B of the above. 
A)  was introduced on February 4, 1999 
B)  is an electronic net settlement network designed to provide settlement to wholesale transactions 
C)  aggregates interbank payments and informs the Bank of Canada of the net amounts to be transferred from and to each participant's settlement account with the Bank of Canada 
D)  Only A and B of the above.

Exam 17: Tools of Monetary Policy

The Bank of Canada will engage in a repurchase agreement when it wants to ________ reserves ________ in the banking system.

The Bank of Canada will engage in a repurchase and resale agreement when it wants to ________ reserves ________ in the banking system.

In the market for settlement balances,when the overnight interest rate is below the bank rate and above the bank rate less 50 basis points,the supply curve of reserves is ________.

The lower limit of the operating band for the overnight interest rate defines ________.

Explain why the bank rate is an upper limit for the overnight rate.

To keep inflation from falling below the target range,the Bank of Canada ________.

If the Bank of Canada pays on deposits to LVTS participants an interest rate of 3.5 percent then the operating target of the Bank's monetary policy is ________.

The Bank of Canada neutralizes government receipts by ________.

The purchase of financial assets by the central bank through the creation of excess reserves for banks is known as ________.

It is the ________ assumption of ________ that allows for the transmission between nominal and real interest rates.

If the operating band for the overnight interest rate is from 3.5 to 4.0 percent,then ________.

Explain why the bank rate minus 50 basis points (ib-50)is the lower limit for the overnight rate.

What are the advantages of SPRAs and SRAs?

If the Bank of Canada wants to relieve undesired upward pressure on the overnight interest rate it will enter into a ________.

The primary indicator of the Bank of Canada's stance on monetary policy is ________.

If the Bank of Canada expects the economy to to be exceeding its capacity,it ________ the operating band for the overnight interest rate.

The Bank of Canada ________ conducting open market operations in Government of Canada treasury bills and bonds in 1994.

The Large Value Transfer System (LVTS)________.

Describe some of the actions the Bank of Canada took to mitigate the effects of widening spreads and increased volatility in the term interbank market in the second half of 2008.

The Automated Clearing Settlement System (ACSS)________.

Why Study Money, banking, and Financial Markets

An Overview of the Financial System

What Is Money

Understanding Interest Rates

The Behaviour of Interest Rates

The Risk and Term Structure of Interest Rates

The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis

An Economic Analysis of Financial Structure

Financial Crises

Economic Analysis of Financial Regulation

Banking Industry: Structure and Competition

Nonbank Finance

Banking and the Management of Financial Institutions

Risk Management With Financial Derivatives

Central Banks and the Bank of Canada

The Money Supply Process

The Conduct of Monetary Policy: Strategy and Tactics

The Foreign Exchange Market

The International Financial System

Quantity Theory, inflation, and the Demand for Money

The Is Curve

The Monetary Policy and Aggregate Demand Curves

Aggregate Demand and Supply Analysis

Monetary Policy Theory

The Role of Expectations in Monetary Policy

Transmission Mechanisms of Monetary Policy

The ISLM Model

Filters

The Bank of Canada will engage in a repurchase agreement when it wants to reserves in the banking system.

The Bank of Canada will engage in a repurchase and resale agreement when it wants to reserves in the banking system.

It is the assumption of that allows for the transmission between nominal and real interest rates.